Questions for the Tax Lady: October 11th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply. I will do my best to get an answer for you!

Question #1: Is it better, tax-wise, for married couples to divorce and cohabit, or is this an urban legend?

Answer: Ah, the marriage penalty, this myth continues to circulate even though it’s largely untrue. Years ago, if both spouses worked, it may have been more beneficial to be divorced and filing taxes separately.

However, years of tax adjustments have removed the marriage penalty from all but the most unique tax circumstances. By and large, the tax code allows married couples equal benefits to single people. For example, the standard deduction for filing single is $5,700. For a married couple filing jointly, the standard deduction is $11,400. Exactly double the amount for single.

Don’t go rushing to a divorce lawyer to save money on your taxes. If you really feel like filing jointly is costing you more money, talk to a tax professional and see if you would do any better by filing separately.

Question #2: I filed an automatic six month extension last April, but have not finished preparing my return yet. Is it possible to request another extension?

Answer: Unfortunately for you, the six-month extension is the end of the line, tax-wise. (Unless of course you are living out of the country). October 15 is the very last deadline before the IRS will start slapping you with failure to file penalties. If you are struggling with preparing your tax return, you may want to enlist the aid of a qualified tax professional.

My recommendation would be to do whatever it takes to get that return mailed or electronically submitted by midnight, October 15. Then immediately start getting ready for the next filing season so you can avoid this problem next year.

Bill Would Extend Home Buyers' Deadline for Tax Credit

Despite reports that there was not enough support for a homebuyers tax credit extension, a bill has been introduced in Senate floor to extend the deadline by a few months. According to the Washington Post, the creators of the legislation hope to allow qualifying taxpayers an additional three months to claim the credit.

Senate Majority Leader Harry M. Reid (D-Nev.) co-authored a proposal that would allow those eligible for the tax credit to close on a home by Sept. 30 to give lenders more time to process a crush of applications.

Reid and his co-sponsors hope to attach the measure to a separate bill moving through the Senate that would extend a variety of tax breaks as well as emergency unemployment benefits. But even if senators succeed in attaching the tax-credit initiative, Democrats are still struggling to assemble the votes needed to pass the overall tax bill.

To qualify for the tax credit -- $8,000 for some first-time buyers and $6,500 for certain current homeowners -- buyers must have signed a contract by April 30 and close on the their transactions by June 30.

The National Association of Realtors said many home buyers will not be able to meet the June 30 closing deadline because of the surge in loan volume and delays related to home appraisals and short sales, transactions in which lenders allow struggling homeowners to sell their homes for less than they owe on them.

Continue reading at Washington Post.com…

Preserve Your Organization's Tax-Exempt Status with IRS

Does the IRS recognize your organization to be a non-profit or have tax-exempt status? The IRS has announced a critical deadline for many tax-exempt organizations. If you want to preserve your organization’s tax-exempt status, you will need to file Form 990 by May 17th or risk the revocation of your federal tax-exempt status. Usually the deadline for filing this form is May 15th, if using the calendar year or the 15th day of the fifth month after an organization’s fiscal year ends. Since May 15th falls on a Saturday this year, Monday, May 17th is this year’s deadline.

Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). Tax-exempt organizations with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on annual receipts. Any private foundations file form 990-PF.

Since 2007, The Pension Protection Act of 2006 mandates that all non-profit organizations (other than churches and other church related organizations) must file this form with the IRS. If your organization does not file for three consecutive years it will automatically lose its federal tax-exempt status. Don’t let that happen, because otherwise, you may be taxed on any income received between the revocation date and your renewed exemption. You will have to reapply with the IRS to regain tax-exempt status.

New Rules Making Tax-Credit Closing Deadlines Tough to Meet

From The WashingtonPost.com:

For thousands of home buyers who scrambled to meet the April 30 federal tax-credit deadline for completed contracts, a new challenge is looming: Can they nail down their mortgage financing and get to closing before the program terminates?

As a result of toughened underwriting standards, confusing new federal disclosure rules, appraisal regulations and a long list of other potential obstacles, meeting that deadline could be harder than expected. In fact, mortgage industry leaders say some buyers who are seeking the tax credits won't get a cent because the clock will run out on them.

Under the extended first-time purchaser and repeat buyer credits -- the former carries an $8,000 maximum amount, the latter $6,500 -- all deals must close by June 30. This shouldn't be a problem for buyers who have already submitted their applications or who apply and are approved in the coming week or two, lenders say.

But credit-seekers who assume that closings can be done in less than 45 days -- as was often the case in recent years -- might be in for an unpleasant jolt. And if a borrower's needed turnaround time from application to settlement is 30 days or less, even the most resourceful lenders might not be able to deliver.

Questions for the Tax Lady: April 19th, 2010

Check out the following new Questions for the Tax Lady answers. As always, feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: What are the IRS deadlines for estimated quarterly payments?

The first estimated quarterly payment for 2010 was actually due last week (April 15^th). However, if you missed the deadline then you should calculate your payment and get it in as soon as possible. The IRS typically does not have a problem with estimated payments that are only a few days late, and if you get your in by the end of the week then you probably will not need to worry about any late penalties. I’ve listed the rest of the estimated payment due dates for the year so you can avoid being late next quarter.

• April 15, 2010
• June 15, 2010
• September 15, 2010
• January 15, 2011

30 Days and Counting: Homebuyer Tax Credit Expires

Time is running out to claim the popular first time homebuyers tax credit. Taxpayers thinking about claiming the credit only have 30 days to enter into a contract, and the sale has to close escrow before the end of June in order to quality. CNN Money posted a story discussing the upcoming deadline. You can checkout a section of their article below, or click here for the full text.

Attention shoppers: You have barely a month left before the homebuyer tax credit expires. But depending on where you live, you might not want to rush out to buy.

First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.

And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time.

There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.

"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated."

That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring.

Property Buyers in US Rush to Beat Deadline for First Time Tax Credit

Realtors and buyers are in a dead rush to meet the deadline for the homebuyers tax credit at the end of this month. Since there has not yet been a final decision about extending the credit, thousands across the country are trying desperately to close escrow before the looming deadline. However, as PropertyWire.com reports, many of them are finding out that they are simply too late.

The latest figures from the National Association of Realtors (NAR) show that its Pending Home Sales Index rose to 110.1 in September, its eight consecutive monthly rise.

The index now stands at the highest level since December 2006 when it was 112.8 and is 21.2% higher than September last year, marking the largest annual gain on record.

But it could be a short-lived blip as many analysts believe that the recovery in the US housing market is being propped up by the first time buyer tax credit that was introduced by the Government to boost demand for houses.

‘What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,’ said Lawrence Yun, NAR chief economist.

Meanwhile, the foreclosure crisis is moving into small towns and suburbs which have previously been untouched by the economic downturn, according to new research.

Tax Evaders Rush to Beat Amnesty Deadline

Now that the government has reached a settlement with UBS, American tax evaders have until September 23 to reveal their overseas holdings or risk serious legal troubles if their names appear on the list UBS is preparing to turn over to the IRS. If taxpayers do decide to turn themselves into the amnesty program, they will still need to pay a fine but will not face criminal prosecution.

The IRS expects to find some tax evaders soon. UBS AG, the Swiss banking giant, agreed to hand over to the IRS the names of about 4,450 secret accounts as part of a court settlement reached last month.

"This is sort of their last, best chance if they are going to get off with lenient treatment," said Evan Stewart, a regulatory lawyer at the firm Zuckerman Spaeder.

"If you're sitting there and you've sheltered $50 million from the U.S. government, are you willing to gamble with the (list of) 4,500 (names) and live in terror for a year?" Stewart said.

The IRS said that, in one week of July, about 400 individuals turned themselves in under the amnesty program. That was four times higher than the number of tax evaders who stepped forward in all of 2008, according to the agency.

Continue reading at Reuters.com…

A Rush to Cash in on "Cash for Clunkers"

As we all know, the massively popular Cash for Clunkers program sponsored by the Federal government has swamped U.S. car dealerships. Unfortunately though, the program is expected to end at 8 PM tonight, as a busy weekend for auto dealers is expected to use up the remaining rebates. So if you are hoping to take advantage of the program then you better hurry up!

CBS News published the following article about how busy dealerships were this past weekend after Friday’s announcement that over 2/3 of the available rebates had been requested.

"I've never seen the showroom - in the 27 years I've been here - this busy," said Brian Benstock, general manager of the dealership, Paragon Honda.

The story is the same all over. At a Toyota dealer in Maryland, salesmen are hip-deep in clunker deals. And the back lot of Christian Gomes's Ford store on Long Island it’s the clunkers themselves that run 60 deep.

Gomes said he sold his entire inventory. The government's Cash for Clunkers program invigorated comatose car showrooms. The biggest winners were Toyota, raking up 19 percent of all the sales, followed by GM with 18 percent, Ford with 15 percent, and Honda with 13 percent.

Richard and Stephanie Miller didn't plan on dumping their clunker. But their 16-year-old Ford Explorer was wheezing after 153,000 miles.

"She gave us a lot of good years, but she's had it," Stephanie Miller said.

So the millers went shopping today. An hour and a half later, awarded with $3,500 in clunker cash from the government and a $1,500 rebate from ford, they were they owners of a bright red 2010 Ford Fusion.

"I voted against Obama but the man has a lot of imagination," Richard Miller said. Stephanie Miller added that she was excited about the gas mileage of the new car.

Swiss, U.S. Seen Needing Time to Ink UBS Tax Deal

The August 3^rd deadline for a settlement between Switzerland and the U.S. on the UBS case seems unlikely, according to several sources close to the case. Alibaba.com recently published a great article on the topic, explaining why a settlement is so hard to reach, and what the outcome is likely to be. You can read a segment of the story below.

Talks between Switzerland and the United States to end a tax row targeting UBS could stretch beyond an Aug. 3 deadline to allow more time for a detailed settlement, a source familiar with the situation said on Friday.

U.S. tax authorities are seeking to force Swiss wealth management giant UBS to disclose the identity of an estimated 52,000 U.S. holders of secret Swiss accounts suspected of dodging taxes even though this breaches Swiss bank secrecy laws.

A trial against UBS was scheduled to start in Miami on July 13 but presiding judge Alan Gold agreed to delay it until Aug. 3 to allow time for a settlement.

A status call between Gold and lawyers from UBS and the U.S. Internal Revenue Service on July 29 could be an opportunity for an announcement of a delay. A meeting between Swiss Finance Minister Micheline Calmy-Rey and U.S. Secretary of State Hillary Clinton is also scheduled on July 31.

"I would not be surprised if during the July 29 call or at the weekend there may be another request for a delay," a source familiar with the situation told Reuters.

Many investors believe the judge will again postpone the trial as the tax talks are complex and working out a deal that without further weakening bank secrecy requires time.

"Nothing will happen on Wednesday. The parties will agree to postpone the deadline until September to reach an agreement," a Swiss-based trader told Reuters.

Two Swiss-based sources familiar with the situation said a deal was unlikely to come before July 29.

Senators Near Bipartisan Health Deal

Earlier today, I came across a new entry on the Huffington Post asserting that a bipartisan group of Senators are nearing a compromise on health care reform. The compromise is said to exclude several key democratic priorities, but is low on costs, which they are hoping will generate support for the bill. But with a month long recess only a few days away, will these last minute negotiations be successful?

The fiscally conservative Blue Dogs were at odds with the leadership over how to pay providers in a government-run health plan that would compete with private insurance. The House bill models the payments based on Medicare, but the so-called Blue Dogs want a negotiated rate similar to private insurance. Other issues remain sticking points for the Democrats.

"We're not ready to support a bill yet," said Rep. Baron Hill, D-Ind., a member of the Blue Dog group, who added: "We'll get there. We are going to pass a health care bill, whether it's now or in the fall remains to be seen."

Without the backing of the 52-member Blue Dogs, it would be difficult for Democratic leaders to pass a bill, especially since no Republican supports the legislation.

"I think there's still a bit of daylight between the positions," said Rep. Earl Pomeroy, D-N.D. "I think the bottom line of Blue Dogs has not been met as of this time."

Continue reading here…

IRS Extends Deadline for Filing

Recently the IRS announced that the deadline for filing 2006 tax returns, or paying any taxes that are due, would be pushed to April 17th. The extension was made because the 15th falls on a Sunday, and the 16th is a holiday in the District of Columbia. Originally the extended deadline only applied to the District of Columbia and six other states that are served by the Massachusetts processing facility. However, this year the April 17th deadline will apply to everyone. For more information check out AccountingWeb.